2025 (9) TMI 67 - AT - Money Laundering

Provisional attachment lapsed as investigation exceeded 365 days under Section 8(3)(a) PMLA with no pending criminal proceedings

Shri K Srihari Babu and Shri Vippa Srinivas Reddy Versus The Deputy Directorate, Directorate of Enforcement, Hyderabad

Shri K Srihari Babu and Shri Vippa Srinivas Reddy Versus The Deputy Directorate, Directorate of Enforcement, Hyderabad - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether a Provisional Attachment Order (PAO) confirmed under Section 8(3)(a) of the Prevention of Money Laundering Act, 2002 ('the Act') continues beyond 365 days where investigation is not completed within that period. 2. Whether the pendency of 'proceedings relating to any offence under this Act before a court' (the second limb of Section 8(3)(a)) is triggered by (a) sending a copy of the ECIR to the Special Court, (b) filing of a bail application, or (c) only by filing of a Prosecution Complaint and cognizance by the Court. 3. Whether the period of an interim order passed by a higher court restraining 'coercive action' is to be excluded from computation of the 365-day investigation period under the Explanation to Section 8(3)(a), and, relatedly, whether an interim order that does not clearly restrain filing of a Prosecution Complaint can justify filing the complaint beyond 365 days without causing lapse of the PAO. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Continuation of PAO where investigation not completed within 365 days Legal framework: Section 8(3)(a) provides that, where the Adjudicating Authority confirms attachment, such attachment shall continue during investigation for a period not exceeding 365 days or the pendency of proceedings relating to any offence under the Act before a court; an Explanation permits exclusion of any period during which investigation is stayed by a court. Interpretation and reasoning: The Tribunal reads the two temporal alternatives conjunctively as intended by the legislature: if the Adjudicating Authority confirms attachment, continuation beyond confirmation requires either completion of investigation within 365 days or the existence of pendency of court proceedings. The 365-day limit is a substantive legislative condition for continuation of attachment absent genuine pendency of prosecutorial proceedings; allowing extension without either would frustrate legislative purpose. Precedent Treatment: The Tribunal considered an interim order of the apex court in a separate matter but treated it as a factual proposition for exclusion only if it restrains investigation; no precedent was followed, distinguished or overruled on the interpretive point. Ratio vs. Obiter: Ratio - PAO cannot continue beyond 365 days where investigation is not completed and no qualifying court proceedings are pending on the 365th day. Obiter - discussion of prosecutorial conduct where complaint filed after 365 days under facts of this case. Conclusion: Where investigation was not completed within 365 days and no qualifying court proceedings were pending on the 365th day, the confirmed PAO ceases to operate on expiry of the 365-day period. Issue 2 - What constitutes 'pendency of the proceedings relating to any offence under this Act before a court' Legal framework: The operative phrase in Section 8(3)(a) and related provisions in Section 44 dealing with cognizance by Special Court and the initiation of proceedings (complaint, cognizance, and subsequent treatment) inform when court proceedings are to be regarded as pending. Interpretation and reasoning: The Tribunal rejects the respondent's expansive construction that pendency is triggered by sending a copy of the ECIR to the Court or by filing a bail application. The Tribunal holds that 'proceedings' for the purpose of Section 8(3)(a) commence with filing of a Prosecution Complaint and taking of cognizance by the competent court; prior actions (sending ECIR, bail applications) do not, by themselves, amount to pendency of proceedings because no court material or complaint resides with the Court until the complaint is filed. Reliance is placed on Section 44 which contemplates cognizance on complaint by the authorized authority and describes the complaint as initiating the court's jurisdiction under the Act. Precedent Treatment: The Tribunal relies on statutory scheme rather than case law; prior practice or submissions suggesting bail filings or ECIR transmission create pendency are expressly rejected as frustrating the statutory 365-day safeguard. Ratio vs. Obiter: Ratio - Pendency of proceedings under Section 8(3)(a) means pendency following filing of a Prosecution Complaint and cognizance; mere transmission of ECIR or filing of bail application is insufficient. Obiter - practical observations on case diaries and routine court practice in bail applications. Conclusion: For continuance of attachment beyond 365 days, there must be pendency of court proceedings arising from a filed Prosecution Complaint and cognizance; incidental filings or transmissions do not satisfy Section 8(3)(a). Issue 3 - Exclusion of period of interim order and filing of Prosecution Complaint during such interim order Legal framework: Explanation to Section 8(3)(a) excludes from computation any period during which the investigation is stayed by any court under any law; separate principles govern interpretation of interim orders restraining 'coercive action.' Interpretation and reasoning: The Tribunal emphasizes that exclusion under the Explanation applies only where there is a court-ordered stay of investigation. An interim order restraining 'coercive action' must, on its face or by necessary implication, restrain the filing of the Prosecution Complaint or investigation steps for exclusion to apply. Where a prosecuting authority files a Prosecution Complaint during the currency of an interim order that is said to restrain coercive action, and there is no discernible prohibition on filing the complaint, the fact of filing indicates either that the interim order did not restrain filing or that the authority treated it as not restricting such filing; consequently, the Explanation cannot be invoked to exclude the interim period from the 365-day computation in such circumstances. Precedent Treatment: The Tribunal considered the text of the apex court's interim order in the related matter and analyzed its scope factually; no controlling precedent altered the statutory interpretation. Ratio vs. Obiter: Ratio - Period of interim order is excluded from the 365-day computation only if the court order actually stays the investigation (or otherwise restrains the prosecutorial step whose delay is sought to be excused); mere existence of an interim order restraining unspecified 'coercive action' does not automatically suspend the 365-day clock unless it clearly affects filing of the Prosecution Complaint. Obiter - observations on prosecutorial knowledge and conduct where complaint is filed during alleged restraint. Conclusion: The Explanation applies only where investigation is stayed by court order; if a Prosecution Complaint is filed during an interim order that does not in substance or effect stay the investigation or bar filing, the interim period cannot be excluded and the PAO may lapse if 365 days elapse with no qualifying pendency. Cross-references and Practical Effect Where an Adjudicating Authority confirms a PAO, continuity beyond 365 days requires either completion of investigation within that period or qualified pendency of court proceedings originating from a filed Prosecution Complaint and cognizance. Attempts to treat procedural acts short of complaint filing (ECIR transmission, bail applications) as constituting pendency are rejected. Exclusion of interim judicial restraint from the 365-day computation is permissible only where the order in fact stays investigation or otherwise bars the prosecutorial act; otherwise the PAO lapses on expiry of 365 days.